Covenants Flashcards
Types of covenants, freehold covenants and leasehold covenants.
What is a covenant?
A promise to do or not to do something. For example, Fred sells The Orchard to Bob and Bob covenants that he will not use the Orchard for commercial purposes.
The 2 types of covenants
Positive covenant
Restrictive covenant
What is a positive covenant?
Positive covenants are obligations to do something, such as keep contribute to a maintenance fund or maintain a wall.
What is a restrictive covenant?
Restrictive covenants are rules preventing certain things from being done on the land, using the property for business purposes.
Sometimes a covenant can be worded negatively but be positive or vice versa, for example “not to allow the fence to fall into disrepair” is really a positive obligation to maintain the fence.
How is a covenant created?
Covenants are usually contained in the same document that transfers ownership of a property from a seller to a buyer, so a TR1/TR2 (transfer of whole) or a TP1/TP2 (transfer of part) or prior to these forms becoming compulsory, a conveyance or transfer.
It can also be created by deed, agreed by lease or legal contract.
Enforce a covenant
In order to enforce a covenant, the original parties must be identifiable (this is normally straight forward as they are named in the deed).
However, s56 LPA 1925 provides that a person not actually named as a party to the original covenant may enforce a covenant - where the
covenant was made with the person seeking to enforce it (not merely for their benefit) (Amsprop Trading v Harris Distribution). The
person who claims the benefit must be existing and identifiable at the date the covenant was made (White v Bijou).
Section 1 of The Contracts (Rights of Third Parties) Act 1999 also provides that a person who is not party to a contract may nevertheless receive the benefit of that covenant where the covenant expressly provides they may or purports to confer a benefit on that person.
The person must be identified in the covenant either by name or by generic description - though unlike S56 LPA 1925, s1(3) specifically
provides that they need not be in “existence when the contract is entered into”. However, this is limited to contracts on or after 11 May
2000 and may be excluded in the contract.
Restrictive Covenants -
Will the burden pass to a successor?
At law, the burden of a covenant is not enforceable on successors of the original covenantor - so, for example, if the original covenantor gave a covenant to do something on the land (e.g. a positive covenant to spend money on it), his successors will not be bound to abide by that covenant (Rhone v Stephens)
At equity, the burden of a covenant will be enforceable on successors of the original covenantor where:
(1) the covenant is negative, i.e. it restricts the owners in some way (e.g. building on land, Tulk v Moxhay)
(2) at the date of the covenant, the covenantee must have owned land which was benefitted by the covenant
There are two requirements:
(a) It must “touch and concern land” - it will “touch and concern” land where (i) it would cease to be a benefit if it were separated
from the ownership of the benefited estate; (ii) it affect the quality, nature, mode of use or value of the benefitted land; and even if
these are satisfied, (iii) it must be expressed in any way to be personal to the covenantee
34
(b) At the date of the covenant, the covenantee must have owned the land which was benefitted by the covenant (LCC v Allen, where
A covenanted not to build on a particular piece of land with the council, but the council did not own land in the neighbourhood.
Successor was not bound as the covenantee did not own the land which was benefitted).
(3) the original parties must have intended that the burden should bind successors - in the absence of express provision, this is implied
into the covenant by virtue of s79 LPA 1925 - but can be excluded by an express term to the contrary.
(4) If a purchaser is to be bound, a notice must be entered on the register
Restrictive Covenant - Will the benefit pass to a successor?
Where it has been established that one party may be bound by the burden of certain restrictive covenants, it must still be established that the other party has the right to enforce the covenants.
• Where the burden of a restrictive covenant has been shown to pass in equity then the claimant must show that the benefit also passes in equity
The benefit of a restrictive covenant can pass in equity where:
(1) Express annexation - formal expression in the deed that they intend the covenant to pass with the land. The land to be benefitted must
be sufficiently defined and there must be clear words of annexation (Rogers v Hosegood)
(2) Statutory annexation - s78(1) Law of Property Act 1925 implies annexation as long as the land benefitted is identifiable and the covenant touches and concerns the land. It can be excluded where contrary intent is shown (Roake v Chadha).
(3) Express assignment - Where the benefit of a covenant is expressly conveyed to a person on sale of the land. The person must be
named at the same time the estate is conveyed.
(4) Building schemes - will exist where there is: common intention that purchasers are subject to mutual reciprocal restrictions enforceable between themselves; and the land in the scheme is clearly defined area known to all purchasers (Clarke v Murphy)
Positive Covenants -
Will the burden pass to a successor?
The burden of a positive covenant cannot pass at equity.
It will not normally pass at common law, but the rule may be circumvented where:
(1) The doctrine of mutual benefit and burden applies - the successor in title cannot take the benefit of an agreement unless he is also prepared to accept the related burdens (e.g. the benefit of an easement to use a road, but refusing the burden of an easement to
share the maintenance costs, Halsall v Brizell). Only burdens that are related to the benefit in some way can be enforced using
this rule
(2) the use of an unbroken chain of indemnity covenants - i.e. the covenantor is obliged to get an indemnity covenant from his successor, so if it is broken the covenantee can sue the original covenantor - who will then sue his successor.
Positive covenant - Will the benefit pass to a successor?
At law, the benefit of a restrictive AND positive covenant will pass where:
(1) the covenant “touches and concerns” the land of the covenantee;
The covenant will “touch and concern” land where:
(a) It would cease to be a benefit if it were separated from the ownership of the benefited estate.
(b) It must affect the quality, nature, mode of use or value of the benefitted land
(c) Even if these are satisfied, it must be expressed in any way to be personal to the covenantee
35
(2) at the time the covenant was made, it was the intention of the parties that the benefit would run with the land - this is now implied in
all covenants by virtue of LPA s78(1) 1925
(3) at the time the covenant was made, the covenantee held the legal estate in the land to be benefitted (Webb v Russell);
(4) the successor must have a legal estate in land - but it does not need to exactly match the original estate (e.g. he could be a tenant of the
purchaser, as he still derives title from original covenantee, Smith and Snipes Hall Farm)
What happens when the burdened and benefitted land is within the same ownership?
If the burdened and benefitted land is in the same ownership - covenant will cease to be enforceable, except in the case of a building scheme
where the covenants will revive if the lands are later divided
Discharge or Modification of a covenant?
Application to Lands Tribunal - Section 84 LPA 1925 allows an application to the Lands Tribunal to ask for a covenant to be either discharged or modified.
The party applying must establish one of 4 grounds:
• Must show that it has become obsolete due to changes in the character of the property or the neighbourhood or to other
relevant circumstance; or
• It impedes a reasonable user AND either - (i) does not provide any practical benefit of substantial value to any person; or, (ii)
is contrary to the public interest and in either case money would be adequate compensation for the loss or disadvantage; or
• Those entitled to the benefit have agreed, expressly or impliedly by their acts or omissions to the discharge or modification; or
• If it can be shown that the proposed discharge or modification will not injure the persons entitled of the benefit of the
restriction.
